A SEP is a Simplified Employee Pension plan. A SEP provides employers (and self employed individuals) an easy way to make contributions toward their retirement and also towards that of their employees. Contributions are made directly to an IRA set up by each employee. The Employer makes the contribution directly to SEP IRA Accounts. The Employer determines how much to contribute each year, so contributions can vary based on the businesses annual performance.
SEP IRA Plans can be advantageous due to the ease of set up, low costs, and their flexibility with regards to annual contributions. The employer determines how much to contribute each year. SEP IRA’s also have higher contribution limits than traditional IRA’s.